Far from being a failure of capitalism, as so many on the left are claiming, the financial crisis we find ourselves is a failure of big government policies and the liberal activists who exploit them.
Stanley Kurtz takes a look at how the Community Reinvestment Act was used by groups like (former Obama employer) ACORN to force banks into giving loans on marginal properties to people with questionable credit backgrounds.
CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in “subprime” loans to often uncreditworthy poor and minority customers.
Any bank that wants to expand or merge with another has to show it has complied with CRA – and approval can be held up by complaints filed by groups like ACORN.
In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions.
Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.
Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.
If you take government and politics out of this equation America wouldn’t be in a financial crisis right now. Which is exactly why the solution to this problem isn’t more government, and a big fat bailout, but rather a return to a strictly free private sector market.